2 We challenged management s assumptions used in the impairment model for goodwill and acquired intangible assets, described in note 14 to the combined financial statements, including specifically the cash flow projections, discount rate, perpetuity growth rates and sensitivities used. 2. The carrying value of internally developed intangible assets in accordance with IAS38 Intangible Assets ; Risk The closing net book value of all capitalised development projects is 720m. The quantum of these balances together with the inherent judgements required to be made when performing an impairment review have resulted in us considering this a significant risk. Response We challenged management s assessment as to whether development projects in-progress were still expected to deliver sufficient positive economic benefits to the combined businesses upon their completion, and for completed development projects, considered whether the useful economic lives selected remained appropriate. 3. Revenue recognition, including the timing of revenue recognition and the accounting for multiple element arrangements; Risk Reed Elsevier s businesses continue to evolve and new business models can result in new revenue arrangements. This can result in circumstances which require careful consideration to determine how revenue should be recognised. Response We performed tests of controls over revenue recognition, including the timing of revenue recognition and the accounting for revenue recognition in multiple element arrangements, as well as substantive testing, analytical procedures and assessing whether the revenue recognition policies adopted complied with IFRS. 4. The valuation of amounts recorded for uncertain tax positions; Risk Reed Elsevier operates in a significant number of jurisdictions around the world, all with differing tax regimes with complex cross-border arrangements, and is therefore open to challenge from multiple tax authorities. Response We considered the appropriateness of management s assumptions and estimates in relation to uncertain tax positions, challenging those assumptions and considering advice received by management from external parties to support their position. 3. Vopak (PWC M. de Ridder) 1. Impairment testing of tank terminal assets The Group operates tank terminal assets in 77 locations, of which 53 locations are under Group control with a total carrying value of EUR 3,307 million (Note 13), and 22 locations are under joint control with a total proportional value of EUR 1,717 million (Note 7) and 2 where the Group has significant influence (Note 7). This area is significant to our audit as the size of the asset carrying value and

3 recoverability of these invested amounts requires significant judgement. Such judgement focuses predominantly on future contractual revenue, which is, amongst others, dependent on the continued attractiveness of the terminal location for users along the major shipping routes and local market circumstances. Management assesses bi-annually if the forecasted financial return of the terminal assets has changed to an outcome below a benchmark based on the weighted average cost of capital for that country. For the latter the Group involves an external valuation expert to assist in the calculation. In 2013 the Group impaired assets totalling to EUR 21.4 million (Note 13). Amongst others, we evaluated the Group s policies and procedures to identify triggering events for potential impairment of tank terminal assets. For the terminal locations that triggered management s test, we reconciled the recoverable amounts to cash flow forecasts as included in the terminal master plans or in certain situations to market multiples from recent tank terminal sales transactions in the region. We challenged management s main cash flow assumptions and corroborated them by comparing them to commercial contracts and inquiries as included in the Group s client management portal, available market reports and historic trend analyses. We also involved our valuation experts to analyse the weighted average cost of capital by country as applied by the Group. 2. Measurement of and change in accounting for pensions The Group operates defined benefit plans in the Netherlands, Belgium, Germany, UK and the US, giving rise to a net pension liability of EUR 66.3 million (Note 26). The net pension liability includes a discounted defined benefit pension obligation totalling to EUR 1,038 million (Note 26). We focused on this because of the magnitude of the amount, its measurement requiring significant judgement and technical expertise and the significant changes in accounting standards for pensions in 2013 (IAS 19R). Amongst others, we involved our experts to assist us in evaluating the actuarial assumptions and valuation methodologies used by the Group. We also confirmed whether the methods to determine key actuarial assumptions are consistently applied, evaluated the rationale for any changes, as well as challenged the reasonableness of the assumptions, by comparing these to benchmark ranges based on market conditions and expectations at the balance sheet date and comparison with peer companies. We also compared the membership census data used in the actuarial models to the payroll data of the Group. We assessed that management appropriately applied the guidance in IAS 19R in its pension calculations and disclosures. 3. IFRS 13 impacts the Group s derivatives with long duration The Group has a derivatives portfolio that includes long dated cross currency swaps (Note 30). The adoption of IFRS 13 in 2013 has a relatively large impact on the valuation of the Group s derivatives in view of their long maturities and the exchange of principal at maturity date. Combined with the recent market developments, including the volatility of the currency basis spread, this has made the valuation of derivatives an area of focus in our audit. We involved our valuation experts in the audit of derivatives. We have audited the valuation of derivatives by testing the input of contracts in the Group s new external valuation system which was introduced in We subsequently verified that the correct curves have been selected for cash flow discounting purposes as well as the mathematical accuracy of the new valuation model used. We have also traced the valuation of the Company s derivatives to confirmations from its counterparties and to the disclosures as included in Note Significant IT migration for the Netherlands business In 2013, the Netherlands business has migrated to a new IT system for its main financial reporting processes. We have focused on this migration due to the inherent risk of error and the impact such an error may have on the control environment of the Group s largest

4 operating segment. In this context we involved our IT specialists and assessed, amongst other things, the quality controls governing the implementation of the new IT system, the configuration within the new system s modules, the interaction between the modules, the segregation of duties and the configuration of expected automated application controls. We also tested the migration of general ledger data from the legacy IT system to the new IT system. 4. TNT Express (PWC R. Dekkers) 1. Assets of TNT Brazil classified as held for disposal The assets and liabilities of TNT Brazil are reported as an asset held for disposal on the balance sheet and presented as a discontinued operation in the income statement as of the first quarter in A specific disclosure is included in note 8 to the financial statements. The valuation and the intention to sell assumption related to this entity are significant to the financial statements and our audit. This involves management judgment given the nature of the business and the related negotiations concerning the disposal. On 30 January 2014, TNT Express N.V. announced that it would retain its Brazilian domestic business. As part of our procedures we considered the accounting treatment as well as the disclosure as a subsequent event in note Strategic initiatives The company is currently engaged in a number of strategic initiatives, most notably the Deliver! programme. These initiatives impacted our audit as follows: The new reportable structure resulted in a change in reportable segments under IFRS 8 (refer to note 34 to the financial statements). The company announced a number of restructuring initiatives during the year. In our audit we addressed the appropriateness and timely recognition of costs and provisions in accordance with IAS 37. These recognition criteria are detailed and depend upon local communication and country specific labour circumstances. We refer to note 11 to the financial statements. We have identified an increased risk in the company s control environment in areas where these organisational changes took place and specifically discussed this risk, management s mitigating actions, and our observations with the company s Executive Board and Audit Committee. We refer to chapter 4 section V, Risk Management. 3. Sensitivities with respect to the valuation of goodwill As a result of changes to the organisational structure, the Company performed a goodwill impairment test during the second quarter of 2013 which led to an impairment charge of 296 million. Subsequently, during the 2013 fourth-quarter closing process, the annual goodwill impairment test was performed resulting in sufficient headroom concerning the carrying value of goodwill. The assumptions and sensitivities in the 2013 fourth-quarter impairment test are disclosed in note 1 to the financial statements. These impairment tests are significant to our audit because the assessment process is complex and requires management judgement, and is based on assumptions that are affected by expected future market conditions. As a result, our audit procedures included, amongst others, using a valuation specialist to assist us in evaluating the assumptions and methodologies used by TNT Express N.V., in particular those relating to the forecast revenue growth and the weighted average cost of capital for various cash generating units. We also focused on the adequacy of the company s disclosures regarding those assumptions. 4. Airplanes reclassified to fixed assets

5 Two Boeing 747 freighters were reclassified from assets held for disposal to property, plant and equipment because a disposal under acceptable conditions was no longer viable. This changes the underlying valuation from fair value to carrying value in the financial statements as disclosed in note 8 to the financial statements. During our audit we identified this valuation risk and performed procedures focused on the timely reclassification and valuation of the airplanes. We reviewed independent valuation reports which support the valuation of these airplanes. 5. Assumptions and forecasts underlying valuation of deferred tax assets and uncertain tax positions The Group operates in various countries with local tax regulations. The country specific tax risks are a significant risk in our audit as these could entail potential material amounts due. Our procedures included, amongst others, the involvement of tax specialists. TNT Express has disclosed the tax risks in note 28 to the financial statements. The company has recorded deferred tax assets in the financial statements resulting from temporary differences and losses carried forward of 198 million, as disclosed in note 23 to the financial statements. The Company recognises these deferred tax assets to the extent that it is probable that future taxable profits will allow the deferred tax assets to be recovered. The realisation probability is impacted by uncertainties regarding the realisation of such benefits, including the expiration date of losses and future taxable income. Our audit procedures included, amongst others, evaluating assumptions and methodologies used by the company to determine the recoverable amount per country. 6. Risk of management override of internal controls The company operates in multiple jurisdictions and is subject to the risk of management override of controls. In order to address this risk, the company has established a comprehensive governance structure as detailed in chapter 4 of the annual report. In our audit, we performed procedures which allow us to rely, to the extent possible, on management s governance structure. We also perform additional audit procedures designed to identify the risk of management override of controls. These procedures included, amongst others, an assessment of the tone-at-thetop, budget to actual analysis, consideration of bonus schemes, assessment of internal control deficiencies, follow-up on whistleblower allegations, revenue recognition and cost cut off procedures, as well as examination of manual journal entries. We also maintained unpredictability in our audits and made specific enquiries at different levels in the organisation to establish consistency. 5. SBM Offshore (KPMG P.W.J. Smorenburg) 1. Revenue recognition on construction contracts involves significant judgement The engineering and construction of Floating Production Storage and Offloading systems (FPSOs) is complex and exposes the Company to various business and financial reporting risks. Revenue arising from construction contracts, in its Turnkey segment, represents more than 75% of the Group s total revenue. The recognition of revenue and the estimation of the outcome of construction contracts requires significant management judgement, in particular with respect to estimating the cost to complete and the amounts of variation orders to be recognised. In addition, significant management judgement is required to assess the consequences of various legal proceedings in respect of construction contracts. Reference is made to Notes to the Consolidated Financial Statements, Accounting principles, C. Critical accounting policies, (e) Revenue: Construction contracts. We identified revenue from construction contracts as a significant risk, requiring special audit consideration. Our audit procedures

6 included an evaluation of the significant judgements made by management, among others based on an examination of the associated project documentation and discussion on the status of projects under construction with finance and technical staff of the Company. We also tested the controls that the Company has put in place over its process to record contract costs and contract revenues and the calculation of the stage of completion. In addition we visited two projects under construction. Furthermore, we discussed the status of legal proceedings in respect of construction contracts, examined various documents in this respect and obtained lawyers letters. 2. Lease classification is complex and requires significant judgement The Company s primary business is to enter into lease agreements for FPSOs with its clients. This concerns both finance leases, in which the risks and rewards are substantially transferred to the client and operating leases, in which the Company retains significant risks of ownership of the FPSO. The classification of a lease agreement, either as a finance lease or an operating lease, is complex and requires significant management judgement. Furthermore, the classification determines the timing of revenue recognition and the presentation in the statement of financial position. Reference is made to Notes to the Consolidated Financial Statements, Accounting principles, C Critical accounting policies, (b) Leases: Accounting by lessor. Our audit procedures included an examination of new lease agreements and modifications thereof, an evaluation of the significant management s judgements with respect to the classification, based on the criteria for finance lease or operating lease, as described in IAS 17 Leases. Furthermore, we assessed the proper recognition of revenues and the presentation in the statement of financial position in respect of the lease agreements. 3. Contingent liability following internal investigation into alleged improper sales practices The Company announced with a press release on 10 April 2012 that it had become aware of certain sales practices involving third parties which may have been improper. Reference is made to Notes to the Consolidated Financial Statements, Note 29 Commitments and contingencies. The investigation identified that there are indications that substantial payments were made, mostly through intermediaries, which appear to have been intended for government officials. This matter required special audit consideration due to its nature. We have assessed the progress and the findings from the investigation and examined various documents in this respect. Our procedures included regular discussions with the Management Board and lawyers responsible for the investigation, an assessment of the remediation measures taken by the Company, verification of agents' fees paid during the year and obtaining lawyers letters with respect to their activities. Furthermore we assessed the adequacy of the disclosure in this respect in Note 29, which describes that the outcome of the investigation may lead to significant penalties, fines or other consequences, which may have a material financial impact on the Company, however a reliable estimate can not be made at this stage. Therefore, in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, a provision has not been recognised in the statement of financial position as at 31 December Sligro (KPMG P.W.J. Smorenburg) 1. Schattingsonzekerheid in de waardering van leveranciersbonussen De grondslagen bevatten onder punt H2 een toelichtingop de verschillende soorten vergoedingen van leveranciers, zoals bonussen, promotionele vergoedingen en betalingskortingen. Deze leveranciersbonussen zijn een significante component van de inkoopwaarde van de omzet. Naast generieke afspraken via Inkoopcombinatie Superunie, betreft het een groot aantal specifieke afspraken met individuele leveranciers. Een gedeelte van de leveranciersbonussen is ontvangen gedurende het boekjaar, maar een aanzienlijk bedrag wordt pas geïncasseerd na balansdatum.

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